In 1993, Lay’s introduced a new product called “Simply Potatoes” that consisted of thick-cut fried potatoes. In 1994, the company was sued by Liggett & Myers for false advertising on the product’s packaging which promoted sales as a healthier alternative to regular potato chips. After a year-long battle in court, “Simply Potatoes” were deemed not to be chips and lost its right to be marketed as such.
In 1994, McDonald’s bought a 7.5% stake in potato chip manufacturer Liggett Group in order to secure a US supplier for its rival chain, Burger King. To help fund the deal, McDonald’s sold some of its stock to Liggett investors. In June 1995, after three years of trying, the Liggett Group’s acquisition of Three B Corporation was finally approved by the Federal Trade Commission (FTC).
The FTC had earlier warned that it would oppose any merger that would give one snack food company control over half of the total sales for two competing brands -Lays and Herr’s- which accounted for roughly 50% of all snack food sales. While the FTC approved the deal, it placed a major restriction on Lay’s products.
To maintain competition in the snack food industry, the FTC required that any food product introduced into the marketplace which contained more than 25% potato content could not be referred to as “potato chips” or “chips.” Instead, they must be called by their generic name — such as “potato sticks” or “twice fried potatoes.”
Snack Foods that are Legally Barred from Calling its Product “chips” :
1. Simply Potatoes (Potato chips) :
In 1998, PepsiCo paid $3 billion to acquire KFC’s regional operations in Latin America and China. It also bought out the Kentucky Fried Chicken chain’s shareholders for $436 million that same year but within two years sold it off to other investors at a loss.
In the meantime, the fast food chain had been losing money and in 2003 its parent company, Yum! Brands was forced to file for a US bankruptcy protection.
2. Lay’s Potato Chips :
In 1992, the FTC forced potato chip manufacturer Liggett & Myers to change its packaging and remove claims that “Thank God for Lay’s” after it was discovered that L&H snack food had been falsely advertising that their chips were a healthier alternative to regular french fries. According to the FTC, L&H chips were not crisper or better tasting than regular French fries and were no healthier due to being deep fried in large amounts of oil in order to crispen them up.
3. Pringles :
In 2003, Kellogg’s announced plans to buy Pringles for $2.7 billion but the deal was met with stiff resistance from Procter & Gamble who argued that Pringles would compete with its Gatorade sports drink and other products.
In 2004, the FTC agreed in part with P&G and ordered Kellogg’s to sell off its side businesses of frozen bakery products, sweeteners and flour milling within a year or have the acquisition blocked entirely. The deal was finally approved later that same year but with many restrictions on Kellogg’s ability to integrate Pringles operations into its own system.
Among other things, Pru had to change the name of its potato chips to “Kellogg’s Pringles” and mandated that in all future promotions and print ads, Pringles would be referred to as a “product” rather than a “brand.”
4. French’s Ketchup :
In 2003, Colgate-Palmolive Brands filed an antitrust suit against French’s Ketchup stating that the company’s claim –featuring prominently on its bag– that “50% of all ketchup sold in this country is made by French’s was false advertising.” According to Colgate, French’s only held an approximate 15% market share in ketchup sales.
5. Maxwell House Coffee (Coca-Cola) :
In November 2004, the FTC filed a formal complaint against Coca-Cola alleging that its “real brand” advertising of “Summit” and “Grande” coffee was misleading consumers into believing that plain old coffee sold in grocery stores, restaurants and gas stations were produced by the company whose name they bear.
Coke is accused of using a process called “extraction” which turns raw coffee beans into finished beverages by adding water at its plant in North Carolina. Coke then packages, sells and distributes the drinks to retailers and restaurants as “Summit” or “Grande.” Coke officials say the FTC complaint was filed after a state administrative law judge dismissed a similar lawsuit by the state of New York.
6. Pringles (Kellogg’s) :
In 2004, Kellogg’s announced plans to buy Pringles for $2.7 billion but the deal was met with stiff resistance from Procter & Gamble who argued that Pringles would compete with its Gatorade sports drink and other products. In 2004, the FTC agreed in part with P&G and ordered Kellogg’s to sell off its side businesses of frozen bakery products, sweeteners and flour milling within a year or have the acquisition blocked entirely.